THE Pentagon on Tuesday abandoned a plan to establish a futures
market that would have allowed traders to profit by correctly
predicting assassinations and terrorist strikes in the Middle
East. Paul Wolfowitz announced the `unbelievably stupid' plan
would be dropped.

Facing outraged Democratic senators, Deputy Defense Secretary
Paul Wolfowitz said he learned of the program in the newspaper
while heading to a Senate Foreign Relations hearing on Iraq.

"I share your shock at this kind of program," he said. "We'll
find out about it, but it is being terminated."

Armed Services Committee Chairman John Warner said in an
interview that he received assurance from the head of the
Pentagon agency overseeing the program that it would "stop all
engines on this matter today."

Warner spoke by telephone with Tony Tether, head of the
Pentagon's Defense Research Projects Agency, after consulting
with Intelligence Committee Chairman Pat Roberts and
Appropriations Chairman Ted Stevens.

The three agreed "that this should be immediately
disestablished," Warner said.

Warner said that DARPA "didn't think through the full
ramifications of the program."

The little-publicized Pentagon plan envisioned a potential
futures trading market in which speculators would wager with one
another on the Internet on the likelihood of various economic or
political events in the Middle East, including terrorist attacks
or assassinations. A Web site promoting the plan
already is available and registration of traders was to
begin Friday.

When the plan was disclosed Monday by Democratic Senators Ron
Wyden of Oregon and Byron Dorgan of North Dakota, the Pentagon
defended it as a way to gain intelligence about potential
terrorists' plans.

Wyden called it "a federal betting parlor on atrocities and
terrorism."

Dorgan described it as "unbelievably stupid."

Criticism mounted Tuesday when on the Senate floor, Democratic
Leader Thomas Daschle of South Dakota denounced the program as
"an incentive actually to commit acts of terrorism."

At the Foreign Relations hearing, Wolfowitz defended DARPA,
saying "it is brilliantly imaginative in places where we want
them to be imaginative. It sounds like maybe they got too
imaginative," he said, smiling.

Sen. Barbara Boxer, a Democrat, told Wolfowitz "I don't think we
can laugh off that program,"

"There is something very sick about it," she said, "and if it's
going to end, I think you ought to end the careers of whoever it
was thought that up. Because terrorists knowing they were
planning an attack could have bet on the attack and collected a
lot of money. It's a sick idea."

DARPA has been criticized by Congress for its
Terrorism
Information Awareness program, a computerized surveillance
program that has raised privacy concerns.

Warner said Poindexter and Tether had personally reviewed the
program.

Warner, Roberts and Stevens declined to say whether the two men
should be fired. Tether was to meet with lawmakers later
Tuesday.

The program is called the Policy Analysis
Market. DARPA said it was part of a research effort
"to investigate the broadest possible set of new ways to
prevent terrorist attacks."

Traders would have bought and sold futures contracts - just like
energy traders do now in betting on the future price of oil.

But the contracts in this case would have been based on what
might happen in the Middle East in terms of economics, civil and
military affairs or specific events, such as terrorist attacks.

Holders of a futures contract that came true would have
collected the proceeds of traders who put money into the market
but predicted wrong.

A graphic on the market's Web page Monday showed hypothetical
futures contracts in which investors could trade on the
likelihood that Palestinian leader Yasser Arafat would be
assassinated or Jordanian King Abdullah II would be overthrown.

Although the Web site described the Policy
Analysis Market as Middle East market, the graphic also
included the possibility of a North Korea missile attack. The
graphic was later removed from the Web site.

In a statement Monday, DARPA said markets could reveal
"dispersed and even hidden information.

"Futures markets have proven themselves to be good at predicting
such things as elections results; they are often better than
expert opinions."